Lazard Brothers & Company v Midland Bank Ltd

JurisdictionUK Non-devolved
JudgeLord Wright
Judgment Date28 November 1932
Judgment citation (vLex)[1932] UKHL J1128-1
CourtHouse of Lords
Docket NumberCase No. 69
Date28 November 1932
Lazard Brothers and Company
Midland Bank, Limited.

[1932] UKHL J1128-1

Lord Buckmaster.

Lord Blanesburgh.

Lord Warrington of Clyffe.

Lord Russell of Killowen.

Lord Wright.

House of Lords

After hearing Counsel, as well on Thursday the 20th, as on Friday the 21st, Monday the 24th, Tuesday the 25th, and Thursday the 27th, days of October last, upon the Petition and Appeal of Lazard Brothers and Company, of 11, Old Broad Street, in the City of London, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal, of the 23d of November, 1931, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order might be reversed, varied, or altered, or that the Petitioners might have such other relief in the premises as to His Majesty the King, in His Court of Parliament, might seem meet; as also upon the printed Case of Midland Bank, Limited, lodged in answer to the said Appeal, and due consideration had this day of what was offered on either side in the Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of His Majesty the King assembled, That the said Order of His Majesty's Court of Appeal, of the 23d day of November, 1931, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.

Lord Wright .

My Lords,


The present appeal is from an order of the Court of Appeal reversing an order of Mr. Justice Roche who had made absolute a garnishee order nisi against the Respondents, and had held that the Respondents were indebted to the Judgment debtors, Banque Industrielle de Moscow, to the extent of £542,730 14s. 7d., and ordered that the Respondents pay to the Appellants £335,230 14s. 7d. in part satisfaction of their Judgment debt and costs. The Court of Appeal decided that the Appeal be allowed and the Judgment and order together with the Order nisi and the Judgment signed in default of appearance should be set aside, with costs: they also dismissed a cross appeal by the present Appellants.


The Banque Industrielle de Moscow (hereinafter called the Industrial Bank) was at the time of the second or Bolshevist Revolution in Russia indebted to the Appellants in large sums: it was at the same time also a creditor of the Respondents in sums exceeding their debts to the Appellants. Both these debts were English debts, payable in England and governed by English law. The Industrial Bank was a corporation carrying on business at Moscow as its domicile and Head Office, with branches at Petrograd and other places in Russia: it had no branches or shareholders outside Russia: the evidence in the action as to its formation was somewhat deficient, but it is clear that in 1916, having then assumed the name of the Moscow Industrial Bank in place of its previous name of J. W. Junker & Co., it was formed under Articles, of which extracts were produced, by a law or statute of the Czarist government. The Bolshevist Revolution took place in October, 1917; on the 27th December, 1917, following the decree of the 14th December, 1917, to be more fully referred to later, possession was taken of the Industrial Bank's Moscow office, its cash, securities and books, by a representative of the Government, accompanied by soldiers. The directors fled to the south of Russia, then outside the limits of Soviet domination, and in April, 1919, four directors were at Rostof on Don, which was not occupied by the Bolshevists till December, 1919. Before that happened, and before the four directors left Rostof on Don, they gave a power of Attorney dated the 16th December, 1919, to one of their number named Alexander Chambers. In 1920 and 1921 letters were addressed to the Respondents signed by Chambers and one or more of his colleagues on the Board with reference to the debts of the Respondents to the Industrial Bank; on 30th July, 1924, a letter was sent to the Respondents on behalf of the Soviet Government stating that the Soviet Government claimed all sums standing in the Respondents' books to the credit of former Russian Banking and other nationalised Companies—a claim which the Respondents declined to admit. On the 29th October, 1930, a writ was issued in the High Court of Justice King's Bench Division by the Appellants against the Industrial Bank, claiming a sum of £362,396 15s. 0d. as debt and interest: an affidavit was sworn on behalf of the Appellants, the terms of which will need consideration later; on that affidavit an order was made to serve notice of the writ by registered post to the Industrial Bank at Moscow. The notice of writ was accordingly sent by registered post addressed simply to the Banque Industrielle de Moscow at Moscow, on 29th October, 1930. On the 24th November, 1930, judgment was entered for the Appellants against the Industrial Bank for £364,471 17s. 2d. and costs in default of appearance. On the 28th November, 1930, the Appellants received a letter from the Soviet Embassy dated the 27th November, 1930, returning the notices of the writ and stating that they could not be delivered in view of the fact that the Banque Industrielle de Moscow went out of existence during the 1917 October Revolution and that the document had been delivered by mistake at the Office of the Commercial and Industrial Bank of the Soviet Republic which Bank had only been formed in 1924 and had no connection with the former Bank. On the 12th December, 1930, the Appellants obtained a garnishee order nisi against the Respondents: a copy of this was sent by the Appellants to the Industrial Bank on the same date, but was returned by post marked "unknown." By an order of the 20th January, 1931, an issue was directed between the Appellants as Judgment creditors and the Respondents as garnishees. The issue came on for hearing before Roche J. in April, 1931. The learned Judge dealt with three main questions:—

(1) whether the Respondents' liability was barred by the Statute of Limitations, since more than six years before the garnishee order nisi demands had been made for payment by or on behalf of Industrial Bank. The Respondents in support of this plea relied on the letters of 1920 and 1921 referred to above as being valid demands made on behalf of the Industrial Bank by its directors; alternatively they relied on the notice from the Soviet Government of 1924, as a valid demand if it should be held that that Government had before that date succeeded to the rights of the Industrial Bank. Roche J. decided against that contention: the matter was not the subject of decision in the Court of Appeal, it has not been argued before this House, and I express no opinion about it.

(2) whether the Order nisi should not be set aside on the ground that the Judgment was a nullity, having been signed against a non-existent defendant, since the Industrial Bank had ceased to exist as a juristic person before the date of the writ.

(3) whether the Order nisi should not further or alternatively be set aside on the ground that there was no proper service on the defendant even if existent.


Roche J. decided questions 2 and 3 in favour of the Appellants, the Court of Appeal decided both points against them, hence this Appeal.


I shall deal first with question (2) which is most important and is decisive, since it is clear law, scarcely needing any express authority, that a judgment must be set aside and declared a nullity by the Court in the exercise of its inherent jurisdiction if and as soon as it appears to the Court that the person named as the judgment debtor was at all material times at the date of writ and subsequently non-existent: such a case is a fortiori than the case which Lord Parker referred to in Daimler Co. v. Continental Tyre Co., 1916 2 A.C. 307. There the directors being all alien enemies could not give a retainer. Lord Parker said, "But when the Court in the course of an action becomes aware that the plaintiff is incapable of giving any retainer at all, it ought not to allow the action to proceed. In such a case the plaintiff cannot be before the Court." In the present case if the defendants cannot be before the Court because there is in law no such person, I think by parity of reasoning the Court must refuse to treat these proceedings as other than a nullity. English Courts have long since recognised as juristic persons corporations established by foreign law in virtue of the fact of their creation and continuance under and by that law. Such recognition is said to be by the comity of nations. Thus in Henriques v. Dutch Went Indies Co., 2 Lord Raymond 1535, the Dutch Company were permitted to sue in the King's Bench on evidence being given "of the proper instruments whereby by the law of Holland they were effectually created a corporation there." But as the creation depends on the act of the foreign state which created them, the annulment of the act of creation by the same power will involve the dissolution and non-existence of the corporation in the eyes of English law. The will of the sovereign authority which created it can also destroy it. English law will equally recognise the one, as the other, fact. The Industrial Bank was a Corporation established by an act of the Czar; but the governing authority in Russia as recognised in the English Courts is now and has been since October, 1917, the Soviet State: Soviet Law is accordingly the governing law from the same date in virtue of the recognition de facto in 1921 and de jure in 1924 by this country of the Soviet State as the Sovereign power in Russia. The effect of such recognition is...

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